Chap 3 : Organizational Structure
– Organization versus Structure
– Theories of contingency approach
• Internal and external factors
• a typology of organizations (Mintzberg)
– Types of organizational structures
•
•
•
•
•
•
functional organization (U-form)
divisional organization (M-form, H-form)
matrix organization (matrix-form)
network organization
composite structure examples
formal and informal structure
Anne Drumaux Management § Organization
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Five circles model
(Hatch, 1997)
ENVIRONMENT
Culture
Social
structure
ORG
Physical
structure
Technology
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Solvay Business School
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Chronology of organizational theories (SCOTT)
1900 - 1930
1960 - 1970
Individual is a rational
Adapt structure
agent
”Organization modeled by exogenous forces”
Organize for efficient production
”Order from rules”
Max WEBER(1864-1920)
Frederick TAYLOR (1856-1915)
Henri FAYOL (1841-1925)
Directive Management
Alfred CHANDLER
Paul LAWRENCE et Jay LORSCH
Johan WOODWARD
Charles PERROW
Contingency and planification
Organization is a closed
system
Organization is an open
system
Herbert SIMON
Human Relations
Michel CROZIER
Participating management
Elton MAYO
Douglas McGREGOR
Abraham MASLOW
Frederick HERZBERG
« role of group and working conditions »
Individual motivation
1930 - 1960
Karl WEICK
James MARCH
William OUCHI
Individual is a social
agent
« Complexity, change, turbulence and adhocracy »
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Solvay Business School
1970 - …
Definitions
• organization is a pattern of
relationships through which people,
under the direction of managers, pursue
their common goals
• organizational structure is the way in
which organization’s activities are
divided, organized and coordinated
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Solvay Business School
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Theories of contingency approach
Internal Variables
age
Starbuck, Greiner, Stinchcombe
size
Dale, Blau, Aldrich
technology
Woodward, Perrow
strategy
Chandler, Child
coordination
Organizational
Organizational
structures
structures
are
are influenced
influenced by
by
External Variables
(environment)
Labor division
Mintzberg
variability
Burns et Stalker
turbulence
Emery et Trist
relativity
Laurence et Lorsch
national culture
Hofstede
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Chandler
Multidivisional firm
Structure has to
match strategy
Diversification
Functional evoluated organization
Vertical integration
Unit firm
Geographic expansion
Field unit
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Environment’s factors
• Burns and Stalker
– The Mechanistic Organization
– The Organic Organization
• Lawrence and Lorsch
– Differentiation and Integration
– Three sub-environments
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Organization Environment
Stable
1. Stable Demand
2 Unchanged set of
competitors
3. Evolutionary
technological innovation
and new product
developments .
4. Government policies
change little over time
Dynamic
1. Changes in Demand
2 Changes in the nature of
competition
3.Revolutionary
technological innovation
and new product
development (R&D)
4. Quickly evolving
government policies
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Solvay Business School
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Burns and Stalker
Mechanistic - RIGID
• specialization and
fragmentation of tasks
• hierarchic structure of
control
• knowledge vertical flow
through hierarchy
• loyalty and obedience to the
superior
• instructions and decisions
• prestige due to job titles
Organic - FLUID
• coordination of tasks to
achieve a common goal
• continuous re-definition of
responsibilities
• lateral flow of knowledge
•knowledge dictate authority
center
• information and advice
• prestige due to expertise
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Solvay Business School
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Mechanistic and Organic Organization
Specialization&Tall Hierarchy
Flat structure
Centralized Decision Making
Decentralized decision making
Knowledge at the top of the pyramid
Knowledge locates everywhere
Employees – procedure oriented
People – goal oriented
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Solvay Business School
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Lawrence and Lorsch (1969)
• Differentiation
– Different organizational functions deal with distinct
segments of environment
– People in different functions develop unique
perspectives and orientations
• Integration
– Functional activities are coordinated and controlled to
achieve goals of organization
– Vertical and horizontal coordination
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Solvay Business School
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Sub-Environment
• The market sub-environment
-- Marketing function
• The technical-economic sub-environment
-- Production function
• The scientific sub-environment
-- Research and Development
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Functional Sub-Structure
• Production
Short time horizon, stable environment, rules and
procedures
• Research and development
Long time horizon, unstable situation,fluid and
organic
• Marketing
Between these two extremes
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Comparative Study
Plastics
Industry
Consumer
Food
Industry
Environ- Differentiation Integration
ment
Dynamic High
Permanent lateral
integration mechanism
Medium
Containers Stable
Industry
Medium
Low
Rules and centralized
decision making;
Lateral integration
sometimes can be
found
Rules and centralized
decision making
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WS2 Contingency Factors
Questions on contingency factors
–
–
–
–
How old is your organization?
What is its size?
How could you characterize technologies used?
What is the status of the environment (stable or unstable,
rate of change)?
– What are the nature of the tasks (repetitive or
differentiated)?
– How would define the division of labor? (specialization into
single tasks, differentiated tasks)
– How would describe the ways the members of your
organization coordinate their respective tasks? How
activities of each members are integrated to produce
common goals?
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Questions on internal dynamics between members
– Could you define different types of staff and personnel inside the
organization? What are their main role regarding the
organization?
– Taking into account difference between formal authority, power
and leadership, would you consider that specific groups of staff
or personnel are in a “better position” regarding the whole
organization? Are they in position to impose their views? On
which matters?
– Do conflicts or potential conflicts exist ? On which? What are the
most frequent type of conflicts? How are they solved? Which
groups are concerned?
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Solvay Business School
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Mintzberg H. (1939-)
The Structuring of Organizations 1979
Power in and around Organizations 1983
ways of coordination
•
mutual adjustment
•
direct supervision
•
process standardization
•
results standardization
•
competences standardization
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Solvay Business School
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Simple
structure
Mechanistic
Bureaucracy
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Professional
Bureaucracy
Multidivision
form
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Adhocracy
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Strategic Apex
Support staff
Technostructure
Middle
line
Operating core
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Centralization
Over-standardization
Support negotiation
“Balkanisation”
Professionnalisation
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Types of organizational
structures
– functional organization (U-form)
– divisional organization (M-form, H-form)
– matrix organization (matrix-form)
– network organization
– composite structure examples
– formal and informal structure
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An organizational chart showing a functional structure
General manager
Purchasing
Engineering Manufacturing
Sales
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Solvay Business School
Accounting
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Evoluated U-form
CEO
Research
Control
Marketing
Finance
Human Resources
Production
Commercial
Purchasing
Export
Production
Sales
Research
plant A
Zone 1
plant B
Zone 2
Sales administration
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Solvay Business School
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Functional structure (U-Form) : advantages
& defaults
A+
efficiency if
environnemental stability and stable technology
career plans policy in each function
best specialists at the top of each function
Dover-centralization due to the General Direction
or/and its staff
no mobility regarding technology
best solution once given a technology
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Solvay Business School
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An organizational chart showing a multi-divisional structure
General manager
CEO
Division B
ENG
MKG
Division A
SALES
FIN
ENG
MKG
SALES
Division C
FIN
ENG
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Solvay Business School
MKG
SALES
FIN
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Product M-form
CEO
R&D
Marketing
production
Finance
Pharmaceutical products
Hospital products
Personal-care products
Market M-form
CEO
Marketing
production
finance
human Resources
Latin America and Far East
North America
Europe, Africa and Midle East
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Solvay Business School
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H-form as specific case of multidivisional structure
CEO
.../...
branch food
Dry products
packing glass
Fresh products
Milk & joint products
transport
.../...
bakery products
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Solvay Business School
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Divisional structure (M-Form and H-form) :
advantages & defaults
A+
based on strategic segmentation : it allows
assessment enterprise position in relation to its
market
constructed as profit centers : it allows
accountability and responsibility in each center
control on same criteria
emergence of generalist senior executives
permits :
strategy definition in each segment leaving global
strategy to top management
duplication of general direction
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Solvay Business School
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Dno scale economies :
organization aimed at optimization at the level of the
division only
no easy transmission of technical competences :
dispersion of specialists in the structure
complex to manage when interdependency
between divisions grows
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General manager
ENG
MFG
SALES
ACCTG
Project
A
Project
B
Project
C
.
.
.
Project
D
Team Members drawn
from functions
An organizational chart showing a
matrix structure
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Exec committee
Asia
North
America
EC
Eastern
Europe
Product
group A
Product
group B
Product
group C
Local
firms
The global matrix
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Solvay Business School
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Matrix structure (Matrix-Form) : advantages
& defaults
A+
double coordination on functions and products or
markets
vertical coordination allows efficiency in each function
horizontal coordination allows effectiveness for each
product or market
avoids defaults of U-form and M-form
break the old principles ( unity of command, unity
of direction)
insists on collective performance more than on
individual performance
introduce some plasticity in the structure
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Solvay Business School
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Defficiency and effectiveness linked to the
acceptance of multiple management
new rules are long to implement
necessity of arbitrage
supremacy stake between functional and divisional
departments
if strong conflict, danger of overflow at direction level
huge cultural shock
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Network structure
• Relatively new
• Replaces vertical communication and control
with lateral relationships
• Appear when rapid technological changes,
shortened product life cycle, fragmented
markets
• Result of outsourcing or collaboration
• Limit : virtual organization
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Spider
Toyota and subcontractors
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Hub
Dell
Benetton
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Web
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Network structure: avantages & disavantages
A+
-
Allows rapid growth
Flexible
Efficient if control (Ouchi : market, bureaucracy, clan)
Common branding
D- Rapid decline too
- Danger if loss of control
- Common image may be difficult to share
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Solvay Business School
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Composit structures
existing structures
under specific conditions
internal growth
partial diversification
process of international expansion
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Solvay Business School
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U-Form internationalization
CEO
Direction subsidiary 1
Production
Direction subsidiary 2
Sales
Export
Finance
M-form internationalization
CEO
Direction subsidiary 1
Division product A
Direction subsidiary 2
Division product B
Division product C
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Solvay Business School
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Matrix-form internationalization
Product strategy dominant
CEO
Division
product A
Division
product B
International Division
Domestic
Zone X
Zone Y
International
Subsidiary
country 1
product B
Subsidiary
country 2
.../...
coordination
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Solvay Business School
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Matrix-form internationalization
country strategy dominant
CEO
Product A
Subsidiary A
country Y
Product B
Subsidiary A
country X
Subsidiary B
country X
International direction
non operational
Country X
Country Y
coordination
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Solvay Business School
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Formal &informal structure
Interpersonal relationships makes the informal
organizational structure
H. Simon : « interpersonal relationships in the
organization that affect decisions within it but
either are omitted from the formal scheme or
are not consistent with it »
C. Barnard : informal relationships help
organization members to satisfy their social
needs and get things done
P. Selznick : « operative system » is the result of
both formal and informal structure
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Solvay Business School
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